India panel gathers to set rate for new sales tax

NEW DELHI, Oct 18 (Reuters) - Finance ministry and state
finance ministry officials gathered in New Delhi on Tuesday for
a three-day meeting that will seek to finalise the main rate of
the Goods and Services Tax and pave the way for its introduction
next April.

The long-delayed tax, which would transform Asia's
third-largest economy into a single market for the first time,
should boost revenues through better compliance while making
life simpler for businesses that now pay a host of federal and
state levies.

Prime Minister Narendra Modi, who wants to make doing
business easier in India, has said India needed the tax reform
to end widespread evasion by businesses and prevent officials
from waging arbitrary tax "terrorism".

Last month the GST Council, a decision making body that
comprises federal and state finance ministers, resolved key
issues on how the sales tax would work and approved draft rules
for its collection.

Finance Minister Arun Jaitley expects to get parliamentary
approval for bills next month that would set the rate and scope
of the GST. The states would also have to approve similar bills
in their assemblies.

The GST would do away with levies charged when goods cross
state lines, a boon for manufacturers and shippers, and shares
in logistics companies including Gati Ltd, VRL
Logistics and Allcargo Logistics Ltd gained
by between 3 and 4.6 percent before the meeting.

The finance ministry has proposed four tax slabs, with the
highest at 26 percent for about 20-25 percent of taxable items.
Other slabs included 12 percent for food and fast-moving
consumer goods (FMCG), and 6 percent for precious metals like
gold and for essential items.

If the states agree to its proposal, the standard rate could
be set around 18 percent, said a government source with the
direct knowledge of talks. Withdrawing various exemptions in the
next budget could help reduce the GST rate later.

A panel headed by Arvind Subramanian, chief economic adviser
to the finance ministry, had proposed a "sin tax" rate of 40
percent for GST on limited items such as aerated drinks, luxury
cars and tobacco products.
(Reporting by Manoj Kumar; Editing by Douglas Busvine and Simon
Cameron-Moore)

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